rabble.ca - economic stimulushttps://rabble.ca/category/tags-issues/economic-stimulus
enDon Getty, premier who battled economic downturn much like today's, among last of Alberta Red Tory leadershttps://rabble.ca/blogs/bloggers/djclimenhaga/2016/02/don-getty-premier-who-battled-economic-downturn-much-todays-amon
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">David J. Climenhaga</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/don-getty-football.jpg?itok=MaUS0V81" width="1180" height="600" alt="Don Getty" title="Don Getty" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em>Like this article? rabble is reader-supported journalism. <a href="https://secure.rabble.ca/donate/" target="_blank" rel="nofollow">Chip in</a> to keep stories like these coming.</em></p>
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<p>As most of us come to understand the hard way, timing is everything, and not just in in football and politics.</p>
<p>As a football player, <a href="https://en.wikipedia.org/wiki/Don_Getty" target="_blank" title="Don getty Wiki" rel="nofollow">Don Getty's</a> timing must have been pretty good. In a decade-long career (that began in 1955) as the Edmonton Eskimos' quarterback, he did, after all, pass a football more than 8,000 yards and lead the team to two Grey Cups.</p>
<p>Getty -- who died early yesterday in an Edmonton nursing home at 82 -- switched to politics at the suggestion of another former Eskimo, <a href="https://en.wikipedia.org/wiki/Peter_Lougheed" target="_blank" title="Peter Lougheed Wiki" rel="nofollow">Peter Lougheed</a>. The patrician Lougheed may not have been much of a professional athlete compared to Getty, playing two years as an undistinguished defensive back starting in 1950, but he was a far bigger star in politics.</p>
<p>With Getty at his side, Lougheed became an Opposition MLA in 1967 and Alberta’s first Progressive Conservative premier in 1971.</p>
<p>Getty served premier Lougheed as intergovernmental affairs minister and energy minister, then stepped out of politics, wisely, in 1979. Not long after that, in the summer of 1981, a recession accompanied by plummeting oil prices hit Alberta, resulting in a situation not unlike the province's current economic plight.</p>
<p>Lougheed prudently stepped aside in 1985, in time to be remembered forever as Alberta's Saint Peter. Getty was tempted once more into the breach, that same year. It was a fateful decision, because whatever timing magic he possessed on the gridiron seemed to desert him, creating the opportunity for the neoliberal takeover that scars Alberta and Canada to this day.</p>
<p>Like most political leaders who encounter an unexpected economic downturn on their watch, Getty wavered between the instinct for unproductive austerity that runs to deep in our Calvinist-influenced culture and the desire to stimulate the economy to keep things ticking along.</p>
<p>As such, his record is mixed, and continues to be controversial.</p>
<p>Nevertheless, as the CBC pointed out in a <a href="http://www.cbc.ca/news/canada/calgary/getty-don-death-reaction-albertans-1.3465466" target="_blank" title="CBC Getty Obit" rel="nofollow">workmanlike unbylined obituary</a> yesterday, deficit and debt were inevitable if the province was to stay above water in circumstances that were beyond the control of the government. Spending was certainly the right way to respond from an economic standpoint. But as the government's leader, it was the Conservative premier who bore the brunt of the attacks on the province’s burgeoning debt, which at one point edged toward $20 billion, from the surging far right.</p>
<p>Royalty revenues dropped by about half in 1986 -- and, remember, at close to 10 per cent they were considerably higher then than they are now. Nevertheless, the PCs won a comfortable majority that year.</p>
<p>"Supporters contend Getty was unfairly blamed for factors that were out of his control," the CBC's unidentified obituary writer dryly observed. Today we can pick at Getty’s record with justice on a variety of points, but on the whole the supporters were right about this.</p>
<p>For Getty, a Conservative, it must have felt as if he were being sacked by his own teammates!</p>
<p>The Conservatives won again in 1989, but Getty lost his own seat in Edmonton to a Liberal, Percy Wickman. A loyal PC trooper stepped aside, and the premier returned a few months later in a by-election in Stettler, in those days a safe seat for the Tories.</p>
<p>Alberta's Liberals, under leader <a href="https://en.wikipedia.org/wiki/Laurence_Decore" target="_blank" title="Laurence Decore Wiki" rel="nofollow">Laurence Decore</a>, now fiercely attacked Getty from the right. If he hadn't quit in 1992, chances are good the Liberals -- who were then really just another species of conservative -- could have won. <a href="https://en.wikipedia.org/wiki/Ralph_Klein" target="_blank" title="Ralph Klein Wiki" rel="nofollow">Ralph Klein</a>, the former Liberal mayor of Calgary, emerged as a contender for the Tory leadership and attacked Getty's record from even further to the right.</p>
<p>It was not so obvious then as it is now, but this was part of a neoliberal-inspired push for hard austerian, market-fundamentalist policies that had been in preparation throughout the democratic West since at least the early 1960s.</p>
<p>Alberta was to be its Canadian beachhead, in Edmonton under Klein the Destroyer, and in Ottawa under the irritating Preston Manning, leader of the Reform Party of Canada. Under the guise of "uniting the right," that party would eventually execute a hostile reverse takeover of the Progressive Conservative Party of Canada, an event that led to the country's bleak decade under Stephen Harper.</p>
<p>With Klein, an opportunist willing to jump on the neoliberal bandwagon because that's the way the wind was blowing, as his successor, Getty was arguably the last "Red Tory" to run Alberta -- unless you're one of those who see Rachel Notley, the NDP premier elected in May 2015, in that light.</p>
<p>As such, when we assess Getty's record, we need to remember a couple of things.</p>
<p>First, if oil prices had stayed high, or recovered sufficiently during his leadership, he would today be as revered as Lougheed. He certainly wouldn't have been remembered for failures, like his honourable role in securing the Meech Lake Constitutional Accord only to see it sabotaged by Manning and his nascent Canadian Tea Partiers.</p>
<p>Second, although Getty's record is not unblemished from a progressive perspective, attacks on many of the policies for which he is most fiercely pilloried -- among them deficit, debt and the willingness to intervene in the economy -- were the right thing to do in the circumstances, even if he didn't go far enough. Plus, he gave us <a href="http://albertapolitics.ca/2016/02/doff-hats-to-don-getty-father-of-family-day-too-bad-about-that-august-holiday/" target="_blank" title="Climenhaga on Getty &amp; Family Day" rel="nofollow">Family Day</a>.</p>
<p>Getty's record as interpreted by the still-powerful neoliberal propaganda machine is subject to as much mythmaking and distortion as that of <a href="https://en.wikipedia.org/wiki/Pierre_Trudeau" target="_blank" title="Pierre Trudeau Wiki" rel="nofollow">Pierre Elliott Trudeau</a> and his <a href="http://rabble.ca/blogs/bloggers/djclimenhaga/2015/08/when-propaganda-becomes-memory-pierre-trudeau-and-national-energ" target="_blank" title="False NEP Memories" rel="nofollow">National Energy Program</a>, a memory from the same era. As it will Trudeau, history will judge Getty more kindly.</p>
<p><em>This post also appears on David Climenhaga's blog, AlbertaPolitics.ca.</em></p>
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</p></div></div></div>Sat, 27 Feb 2016 07:19:03 +0000djclimenhaga123207 at https://rabble.caWe need employment insurance reform in Budget 2016 https://rabble.ca/blogs/bloggers/progressive-economics-forum/2016/02/we-need-employment-insurance-reform-budget-2016
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Angella MacEwen</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/fix_ei.jpg?itok=6AURul0n" width="1180" height="600" alt="Photo: Tania Liu/flickr" title="Photo: Tania Liu/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em>Like this column? rabble is reader-supported journalism. <a href="https://secure.rabble.ca/donate/" target="_blank" rel="nofollow">Chip in</a> to keep stories like these coming.</em></p>
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<p>A coalition of community and labour organizations have come together to present their views on necessary EI reforms as part of the pre-budget process.</p>
<p><strong>Joint community and labour statement on the 2016 Budget, stimulus and EI</strong></p>
<p>We urge the government to act quickly and decisively to restore the integrity of Canada's EI social insurance system.</p>
<p>In particular, it is vital that the 2016 Budget provide economic stimulus and be at the ready as the country prepares for difficult economic storms. As an earlier federal study found, EI is "the single most powerful automatic stabilizer" reducing both GDP and job losses by up to 14 per cent during recessions. Much of that earlier capacity has been lost with only 40 per cent of the unemployed now receiving EI benefits after years of repeated cutbacks.</p>
<p>We recommend the government delay any decision on premium changes and immediately begin the job of making much-needed improvements to EI. All are long overdue but will now also serve as strong economic stimulus in the 2016 Budget:</p>
<p><strong>1. Repeal the 2012/13 EI changes. </strong></p>
<p>This includes but is not limited to the punitive and discriminatory job search rules, a detrimental "best weeks" calculation for low-income workers, removal of the extended benefit pilot project, erosion of the "working while on claim" benefit for those taking casual work while unemployed, and the politically motivated addition of new EI regions in Prince Edward Island and Canada's North.</p>
<p><strong>2. Move up EI improvements. </strong></p>
<p>This includes the promised one-week waiting period and reforms to the EI Hours System that will expand access and restore reasonable benefit durations. The elimination of the 910-hour rule for new immigrants, young workers, and parents re-entering the labour force is an important down payment. But other reforms are urgently needed. EI must be allowed to do the job it's supposed to do in a labour market overflowing with precarious, temporary and part-time jobs and now facing a downturn.</p>
<p><strong>3. Immediately address rampant problems with EI service delivery and appeals. </strong></p>
<p>Staffing levels and in-person services have seriously declined, discouraging workers from pursuing a benefit claim. The appeal system is also suffering with the Social Security Tribunal that was introduced with the 2012 changes; the model requires fundamental reforms and restoration of the business-labour role.</p>
<p><strong>4. Ensure there is an independent EI Account and that EI contributions are used exclusively to fund EI programs. </strong></p>
<p>This includes the projected 2016 surplus, which should be used to pay for the highlighted improvements.</p>
<p>On behalf of the Interprovincial EI Working Group:</p>
<p><em>Unemployed Workers Help Centres, Saskatchewan</em></p>
<p><em>Alberta Federation of Labour</em></p>
<p><em>Community Unemployed Help Centre, Winnipeg</em></p>
<p><em>Good Jobs for All Coalition, Toronto</em></p>
<p><em>Canadian Labour Congress</em></p>
<p><em>Coalition de l'Est du Québec</em></p>
<p><em>Fédération des travailleurs et des travailleuses du Québec </em></p>
<p><em>Mouvement autonome et solidaire des sans-emploi (MASSE) </em></p>
<p><em>Confédération des syndicats nationaux</em></p>
<p><em>Centrale des syndicats du Québec</em></p>
<p><em>Centrale des syndicats démocratiques</em></p>
<p><em>Public Sector Alliance of Canada – Atlantic</em></p>
<p><em>Nova Scotia Federation of Labour</em></p>
<p><em>New Brunswick Coalition Against EI Cuts</em></p>
<p><em>Newfoundland and Labrador Federation of Labour</em></p>
<p><em>PEI Coalition for Fair EI</em></p>
<p><em>… and others.</em></p>
<p><em>Photo: <a href="https://www.flickr.com/photos/75511860@N00/3627165279/in/photolist-6wwaSp-65iPag-6wwrGX-6wwsLB-6wwsmX-6wABpA-6wwqbi-6wwpzp-6wAxEN-6wAwZN-6wwnbT-6wAvS3-6wAvgC-6wwkyZ-6wwjVF-6wwixg-6wAsvA-6wwhpV-6wAq7o-6wApv9-6wweBK-6wwefz-6wAn1q-6wAjAh-6wAhUb-6ww85v-6ww7c4-6ww6Mi-6ww5op-6wAd8A-6wAbP9-6ww2c8-6wAaYU-6wvYT4-6wA8zw-6wA87N-6ww7Fv-6wwjgB-6wAhBh-6wwp5M-6wwoM8-6wAqtN-6wwa8k-6ww9pc-6wAdNC-6ww338-6ww1a6-6wvZE2-6wArjL-6wAqUU" target="_blank" rel="nofollow">Tania Liu/flickr</a></em></p>
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</p></div></div></div>Thu, 18 Feb 2016 01:32:46 +0000Progressive Economics Forum123062 at https://rabble.caBoosting the economy for the rest of us https://rabble.ca/blogs/bloggers/progressive-economics-forum/2016/01/boosting-economy-rest-us
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Michal Rozworski</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/nickel.jpg?itok=gMFYeYY3" width="1180" height="600" alt="Photo: Norris Wong/flickr" title="Photo: Norris Wong/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em>Like this article? rabble is reader-supported journalism. <a href="https://secure.rabble.ca/donate/" target="_blank" rel="nofollow">Chip in</a> to keep stories like these coming.</em></p>
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<p>Elites and the talking heads in the media are <a href="http://www.canadianbusiness.com/blogs-and-comment/my-fellow-economists-bay-street-might-be-right-this-time/" rel="nofollow">arguing</a> about how to respond to Canada's soured economic outlook. Who should try to boost the economy: the federal government via fiscal stimulus or the Bank of Canada via monetary policy? But while elites argue amongst themselves, the overriding context is a transfer and concentration of economic power upwards. This, not $10 billion here or 0.25 per cent there, is what hamstrings any policy response going to the benefit of the many.</p>
<p>First, some context. Last week's <a href="http://www.bankofcanada.ca/2016/01/mpr-2016-01-20/" rel="nofollow">report</a> from the Bank of Canada describing the state of the economy did not make for happy reading. While there is no crash, no panic and no crisis, the picture isn't particularly rosy. The kind of generalized malaise and stagnation that has affected much of the globe since the last crisis -- and that our resource boom staved off -- seems to be hitting home. The Bank revised downwards its projections for both growth and inflation, and has a history of being overoptimistic.</p>
<p>As the big drop in the price of oil is looking more and more long term (and actually coming back to what it has been in inflation-adjusted terms in the very long run), other parts of the economy have not yet picked up the slack. More Bank of Canada <a href="http://www.bankofcanada.ca/wp-content/uploads/2016/01/san2016-1.pdf" rel="nofollow">analysis</a> released last week, focusing on the impact of cheap oil, said as much. Here's the headline chart showing a projected long negative adjustment to lower oil prices across the whole economy, beyond just the oil provinces:</p>
<p><img src="/sites/rabble/files/node-images/20160121-boc-oil-effect.jpg" width="553" height="328" /></p>
<p>Here, for one more example, are investment projections broken down between the oil and gas sector and the rest of the economy:</p>
<p><img src="/sites/rabble/files/node-images/20160121-boc-investment.jpg" width="554" height="432" /></p>
<p>In plain language, the resource boom has left some deep scars in other parts of the economy. Exporters of goods and services aren't quite picking up the pieces after the oil producers who are today selling oil for <a href="http://www.independent.co.uk/news/business/news/all-the-things-that-cost-more-than-a-barrel-of-oil-including-a-barrel-a6818786.html" rel="nofollow">less than</a> the barrels it's shipped in. In the meantime, all of us just took what is effectively a sizeable wage cut as the Canadian dollar has fallen sharply along with the price of oil.</p>
<p>So if that's the diagnosis, where is the argument over what to do about it? Oddly enough, it's the Bay Street financiers who are pushing the new Liberal government to spend, and spend more than promised. Not only that, with less trust between themselves, the banks are <a href="http://www.bloomberg.com/news/articles/2016-01-19/in-canada-one-signal-of-2008-financial-crisis-is-flashing-again" rel="nofollow">helping make</a> the alternative, monetary policy, less effective than it would otherwise be.</p>
<p>Anytime Bay Street calls for more government spending, we should at least be asking one question: why? Is it because the private sector isn't investing enough on its own? That is surely part of it. With rising excess capacity, less appetite for private investment in decimated export industries and lots of global uncertainty, government can take on risk and provide some minimal returns with debt-financed spending.</p>
<p>Is it because government investment can be channelled to where it will serve profit opportunities best? This too is the case. After decades of neoliberal restructuring -- away from public housing to mortgage guarantees, away from EI payments to more insecure work, away from industrial policy to free trade and away from truly public services to a more subcontracts and public-private partnerships -- the conditions have rarely been better for big business and finance to get a helping hand from the government.</p>
<p>The opposite argument says that while Canada is a small, open economy so and much of how our economy adjusts happens through the gyrations of our dollar. That more spending that boosts the economy somewhere will lead to contraction elsewhere. Regulating the economy in the interests of business -- opening it up for money and closing off opportunities for people -- has made this more likely. And it's not that monetary policy has been ineffective: the U.S. quantitative easing (QE) program, and to some extent those of others, has shown as much. There is no doubt it helped rescue the economy from crisis in 2008. At the same time, one of the overriding concerns of the U.S. Federal Reserve hasn't changed: <a href="https://www.jacobinmag.com/2016/01/federal-reserve-interest-rate-increase-janet-yellen-inflation-unemployment/" rel="nofollow">to keep a cap on wage growth</a>, leaving the fruits of the meager recovery flowing upwards. Monetary policy has helped avert crisis elsewhere -- but one also a recovery heavily biased towards elites.</p>
<p>This then is the false bind faced by elites and the very real one faced by the rest. The broad effects of fiscal policy may be dissipated away, but monetary policy in its current form keeps driving crisis-prone, debt-financed consumption for regular people and higher-asset values (stocks, houses, art and other baubles), therefore bigger fortunes, for the wealthy. And remember that wealth inequality in Canada has grown (<a href="http://www.huffingtonpost.ca/2015/06/03/wealth-gap-canada-statscan_n_7502848.html" rel="nofollow">doubled by some measures</a>) since 2000.</p>
<p>Trying to pass as a rich debate, this argument merely demonstrates the poverty of response to economic malaise. The structural bounds of "realistic" policy options are more than ever apparent, represented here by the "natural governing party" Liberals the same way someone like Hillary Clinton, <a href="http://www.cnbc.com/2015/05/05/hillary-is-the-favorite-among-millionaire-voters-survey.html" rel="nofollow">the millionaire's favourite</a>, represents them in the U.S.</p>
<p>There are alternatives. Canada needs public investment to be sure, but who will benefit and how? Could we retool the shuttered or shuttering factories of Ontario's rust belt to create high-speed rail and build a link between Calgary and Edmonton? Could we re-invest money and change the rules for unemployment insurance so that those losing their jobs in Alberta don't have to look for first available crappy job or leave their families like those in the Maritimes did for work in the oil sands?</p>
<p>A recent <a href="http://www.macleans.ca/economy/economicanalysis/no-albertas-oil-patch-doesnt-need-a-bailout/" rel="nofollow">article in Maclean's</a> argued that Alberta and its oil industry don't need a bailout because southwestern Ontario has suffered more with less bailout money. The industry certainly doesn't need a bailout and, yes, Ontario's manufacturing heartland hasn't seen much help, shedding factories and jobs to global competition and supply chain restructuring. It's easy to pit people against one another, but there is a common thread from Ontario in the 2000s to Alberta today: an economy that disregards workers and regular people while helping to drive our planet further into ecological crisis.</p>
<p>Ontario boomed on cars, and then Alberta boomed on oil. Both were marks of an irrational economy and both busts have hit workers hardest. Ontario saw a toxic brew of layoffs and shutdowns from the private sector mixed with slow but steady austerity from successive provincial governments. Alberta may yet see the same given the paltry bounds of acceptable policy.</p>
<p>Take a look at the bailout of GM after the 2008 financial crisis. Ottawa bought shares (stimulus) and made a tidy profit on them but this had no effect on the restructuring still ongoing in Ontario. This amounts to playing the same short-term gain game as the private sector. A big stake could have been used influence corporate policy, to start to re-enact industrial policy and to reactivate a region.</p>
<p>Or take what has happened to EI. Today, over six in 10 of the unemployed do not see any benefits to help ride over the rough times. This forces people into bad jobs quickly, further driving down standards for everyone and leaving no time for retraining, for instance towards green jobs. This is an old-school kind of precarity. Investing in simple, public unemployment or retirement insurance schemes helps fight this kind of precarity, leaving us less at the mercy of employers.</p>
<p>Talking heads for and against talk about fiscal stimulus "shovels in the ground," a kind of bastardized Keynesianism that ignores the loss of power on the part of the majority. As the elite discussion over the future of policy grabs the big economic headlines, we also learn that 78 per cent of Ontario employers are <a href="http://www.thestar.com/news/gta/2016/01/20/inspection-blitz-finds-three-quarters-of-bosses-breaking-law.html" rel="nofollow">breaking</a> basic workplace rules and protections.</p>
<p>So while policy elites care about interest rates, your boss cares about the length of your lunch break or skimping on safety at work. It's a neat package. Policy debates over "the economy" are important, but this basic, workplace-level injustice shows just why we have to rebuild power from the bottom up and how far there is to go.</p>
<p>When the options from the commentariat are "<a href="http://news.nationalpost.com/news/canada/canadian-politics/andrew-coyne-pass-the-word-to-bay-street-we-dont-need-any-fiscal-stimulus" rel="nofollow">grin and bear it</a>," "help us get richer by driving up asset prices and your debt" or "give us fat contracts to build things," it's easy to lose track -- and lose hope. Let's remember that the economy isn't some separate special part of the world, and especially not one that works by some special set of rules always rigged by elites against regular people. As we look set to join the club of global economies mired in stagnation and inequality, there is no point wasting time in getting started turning the economy around in our favour. Elites will keep trying to leave this bust better placed to get the most out of the next boom. We shouldn't let them get away with it.</p>
<p><em>Originally posted to my blog <a href="http://rozworski.org/political-eh-conomy/2016/01/21/elites-debate-boosting-the-economy-but-for-whom/" rel="nofollow">here</a>.</em></p>
<p><em>Photo: <a href="https://www.flickr.com/photos/norriswong/1435112637/in/photolist-3bPjZk-9WA43c-e8ieZb-5sdyhE-duTnMn-5NgktA-5joBX-9MvD25-qErb7g-dzxtzr-bcnRDH-mdBDJ-7E6MKU-4kd6wn-dhoso5-dhopsx-7D67zy-7D2j1p-7D6brE-5s9dEg-4yzS-yXe3a-accJdc-accJ7H-accJir-x3j51-55yNef-8Vz77w-4kh9eQ-6cm4V-5gFUwT-yq24Wb-6Q9LFA-4bN79f-qLtXi2-74SLyL-q6Uf2f-54dPRS-549BrF-fw9E8a-arXw9-4KGT6-7uiaR3-7yUWAD-7u1pzc-7GKEPc-549AWx-5xuJuw-eEdXLk-74SLoL" target="_blank" rel="nofollow">Norris Wong/flickr</a></em></p>
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</p></div></div></div>Wed, 27 Jan 2016 13:29:19 +0000Progressive Economics Forum122685 at https://rabble.caMissing in (debate) action: Macroeconomic lessons from the Great Depressionhttps://rabble.ca/blogs/bloggers/progressive-economics-forum/2015/09/missing-debate-action-macroeconomic-lessons-great
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Mario Seccareccia</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/depression_statue.jpg?itok=5qUvfyBy" width="1180" height="600" alt="Photo: Brian Talbot/flickr" title="Photo: Brian Talbot/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em>Like our economic coverage? rabble is reader-supported journalism. <a href="https://secure.rabble.ca/donate/" target="_blank" rel="nofollow">Chip in</a> to keep stories like these coming.</em></p>
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<p>Since the October 2008 federal election, Canadian politicians have been struggling to come to terms with what, to all accounts, has turned out to be a "lite" version of the 1930s, whose major difference is that today we have a much larger government sector that is now about one-fourth rather than one-tenth of gross domestic product, thereby offering somewhat of a makeweight (despite the adoption of fiscal austerity over the last five years). Also, we have today an indomitable Canadian consumer who continues to spend somewhat because of the easy credit that the banking sector creates in additional purchasing power to supplement an otherwise stationary, if not declining, real personal disposable income, as long as households are able to service their debts at such record low levels of interest rates set by the Bank of Canada.</p>
<p>However, much like the 1929 crash, we experienced a worldwide financial crisis centered in the U.S. in 2008. As it is well known, the financial crisis triggered a collapse of economic activity, which after a short fiscal stimulus immediately after the financial crisis in 2009, governments are now back to being obsessively concerned about government deficits. Given their fears of being financially in the red for a significant length of time, fiscal policy inaction has become the norm nowadays just as it was during the 1930s. Indeed, during that era, those Herbert Hoover/R.B. Bennett policies of austerity, implemented in the name of strengthening investors' confidence, did little of that, since investment spending remained abysmal. By initially putting a lid on public spending, what these policies did was to help to keep economies in a state of long-term stagnation during the Great Depression despite some short-lived socially desirable New Deal measures put in place until Western governments justified, on a more massive scale, net public spending by implementing a less socially desirable, yet equally efficient, brand of what has been sometimes described as "military Keynesianism" during the Second World War. Some seven years after the financial crisis in 2008, we seem to have a repetition of what, in appearance, looks more and more like the 1930s scenario that even the former secretary to the U.S. Treasury and former director of the U.S. National Economic Council, Lawrence Summers, has decried as a trend towards a state of secular stagnation.</p>
<p>There are three important lessons from the Great Depression to which our political leaders seem to be oblivious because of what seems to be a collective amnesia. First of all, to kick start an economy stuck in a state of secular stagnation (that is, a situation in which private businesses are unwilling to undertake significant spending), it is up to the state to do so. During the first two decades of the postwar period, governments espoused some hybrid form of the basic principle of "functional finance," which simply affirmed that budget deficits (or surpluses) should not be consider as ends in themselves but rather as means or instruments to achieve socially desirable macroeconomic goals, such as low rates of unemployment and high rates of economic growth. Hence, unless one lives in a country without its own currency (such as Greece) or in a dollarized regime (such as Ecuador), the federal government should abandon the principle of seeking to achieve budget balances or a budgetary surplus for all seasons.</p>
<p>But why is deficit spending not a problem? This brings us to a second lesson. In an advanced monetary economy as ours, at the macroeconomic level there must be at least one sector of the economy that spends more than it receives. If economic agents in an economy spend only what they receive as incomes, then at best such an economy will remain stuck in a stationary state, without growth. In reality, we know that certain groups, who save, may actually want to spend less than their total revenues or incomes, and hence there must be some other sector that must spend more than it receives to sustain spending growth in an economy. How can one envisage growth in an economy in which both the private sector and the public sector refuse to spend more than their receipts, thereby refusing to run deficits? Where will the net spending come from? That was the waiting game and scenario of the 1930s during which period the economy only began to grow significantly once large doses of net government spending were undertaken at the end of the 1930s because of the Second World War.</p>
<p>As a corollary, there is a third simple lesson. Let us imagine the economy as being regrouped into two very large sectors, namely the private sector (households and firms representing, say, three-fourths of the economy) and the public sector (all levels of governments representing the remaining one-fourth), while abstracting for now the net spending behaviour of foreigners. In this economy, if, say, the consolidated public sector spends more than it receives (that is, a situation in which the government sector runs a deficit), then the private sector will find itself receiving more than it is spending, that is to say, that it will be building up savings that would permit private agents to deleverage if they are in debt. Needless to say, if we also add foreigners who are willing to buy more of our wares than we buy of theirs, then the positive net exports would further compound this deleveraging of the private sector domestically. If, on the other hand, the government sector begins to run surpluses, this would be destroying private saving and increasing household debt.</p>
<p>As former prime minister Paul Martin has said very clearly in his support of the Liberals' program during this election campaign, the reason why he was able to achieve federal budgetary surpluses for over a decade since the mid-1990s was because households had been running up huge debts as interest rates were falling and the U.S. economy was running on six cylinders by generating record levels of positive net Canadian exports, especially during the Clinton years of the late 1990s. Nowadays, none of these elements are in place. Households are overextended, interest rates cannot go any lower and our neighbours to the south have also been suffering anemic long-term growth. These are not unlike the conditions prevailing during the 1930s, when the private sector faced an increasing debt burden, interest rates had reached bottom, and countries internationally had been seeking to "beggar thy neighbours," as all these countries were seeking to achieve trade surpluses, which of course is logically impossible for the planet as a whole, and all that it did was to spread deflationary pressures internationally!</p>
<p>Indeed, a policy of seeking to run budget surpluses until 2020 as targeted by both by Stephen Harper's Conservatives (of about $4.7 billion annually) and Tom Mulcair's NDP (at around $3.5 billion annually, pulled from the NDP Fiscal Framework), will do nothing but to destabilize further the private sector by preventing Canadian households from deleveraging via increased savings through higher overall income growth. Why would the federal government want to prevent private households from deleveraging? There is something particularly pernicious about such a proposed fiscal policy of striving to achieve budgetary surpluses largely on the backs of the household sector. There is nothing "sound" about a policy whose actual effect will be to de-stabilize the finances of the private sector. Interestingly, Justin Trudeau's Liberals have at least understood the need to stimulate the economy in the current context and they should be applauded for recognizing this. Yet, even they have not fully abandoned the principle of "sound finance" in favour of the principle of "functional finance," since presumably the latter are themselves committed to balancing the books by 2019 after which they will have also reached the Nirvana of budget surpluses as they had achieved during the Chrétien and Martin years!</p>
<p>Why has our current crop of Canadian political leaders gotten themselves trapped in this rhetorical box of "sound finance" that will merely guarantee that our economy will remain stuck in a state of secular stagnation? Must we wait for some outside shock to end fiscal austerity as had happened at the end of the 1930s? In defence of his 2009 fiscal stimulus, in 2008 Prime Minister Harper himself <a href="http://www.thestar.com/news/2008/11/23/deficits_essential_harper_says.html" target="_blank" rel="nofollow">affirmed</a> that one of the causes of the Great Depression was that policymakers "undertook to balance the books at all costs -- raising taxes and contracting government economic activity at a time when fiscal stimulus was absolutely essential." Why is it that a fiscal stimulus was appropriate in 2009, but that it is inappropriate today and that we must now target fiscal surpluses during this recession?</p>
<p><em>This is a guest blog post from Mario Seccareccia, Professor of Economics, University of Ottawa.</em></p>
<p><em>Photo: <a href="https://www.flickr.com/photos/b-tal/2767650536/in/photolist-5dyW5G-5ZtLPj-bR2UJ4-bR2UJe-5Zavff-5vAnTX-6uAR6m-6vnnvs-6u9eKv-adr1HP-6sgWBn-5RcvVx-adtRfG-adr1NM-adr1Fv-j7BvJA-adr1Lg-5n7r5j-ebK9JS-67JFR6-5sHc4g-s1EUoh-5KFFLq-qUEVPq-63rShT-5ni5Eq-bohmSg-jqNt6Q-6Urzbm-bC8dBb-bR2UJF-bR2UHH-eqNvWN-5c7aqJ-enBPHd-evV7SN-2CWpnK-btn1tm-enDQVH-5Z4m9W-evTjqX-eogMT9-64aUj3-xsMxcZ-ewWXCD-evTmc6-65swBB-5ZtAsW-evVdgq-enBQQ7" target="_blank" rel="nofollow">Brian Talbot/flickr</a></em></p>
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</p></div></div></div>Wed, 23 Sep 2015 14:58:57 +0000Progressive Economics Forum120426 at https://rabble.caElection 2015: The political economy of balanced budgets https://rabble.ca/blogs/bloggers/progressive-economics-forum/2015/09/election-2015-political-economy-balanced-budgets
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Wenonah Bradshaw</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/coin_stack_loonie.jpg?itok=TjmnC3Ht" width="1180" height="600" alt="Photo: KMR Photography/flickr" title="Photo: KMR Photography/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em> <a href="https://secure.rabble.ca/donate/" target="_blank" rel="nofollow">Chip in</a> to keep stories like these coming.</em></p>
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<p>First, disclosure. I wear several hats. In addition to being a progressive economist, I am a member of the NDP. I have been since 1988. I will be voting for the NDP candidate in my riding and I just donated $100 to the party, with more to follow.</p>
<p>The recent promise of four years of balanced budgets by the Mulcair-led NDP has irked several progressive economists (see <a href="http://www.theglobeandmail.com/report-on-business/rob-commentary/the-ndp-goes-down-the-sound-finance-rabbit-hole/article26168909/" rel="nofollow">Marc Lavoie</a> and <a href="http://www.progressive-economics.ca/2015/08/29/mulcair-is-wrong-on-the-deficit-cozying-up-to-the-neocons/" rel="nofollow">Louis-Philippe Rochon</a>), who are puzzled over why Canada's social democratic party would eschew running deficits during a period of cyclical slow-down and probable stagnation. The quick answer is that the Mulcair team is not trying to convince mainstream economists (a relatively small, spread-out segment of the Canadian electorate) of the wisdom of post-Keynesian economic policy, but rather is trying to persuade the median Canadian voter (a problematic concept, for sure) that they would not be the Ontario Bob Rae government of the early 1990s.</p>
<p>Progressive economists sometimes refer to themselves as political economists. However, I fear we sometimes don't given enough attention to the political. To implement your economic policy platform, you need to win the electoral competition game. Our game is a majoritarian one, meaning winning 50 per cent plus one seat to form the government. In this federal election, that involves winning at least 170 of the 338 seats of the House.</p>
<p>Let's check the political arithmetik: at dissolution of the 41st Parliament in August, the NDP held 95 of 308 (versus the Conservative 159 and the Liberal 36). Note the increase of 20 seats from 308 at dissolution to the 338 up for grabs in the October election due to the 2012 electoral redistribution. Let's look at the distribution of NDP incumbent seats across the regions: Atlantic 6 of 32; Quebec 54 of 75; Ontario 19 of 106; Prairies 3 of 56; British Columbia 12 of 36, the North 1 of 3.</p>
<p>To form the government, the NDP have to win an additional 75 seats as well as retain their 95 incumbent seats to bring their number to 170. Let's assume they retain their seats in Atlantic, Quebec and B.C./North, but make no further gains in those regions; that's 73 seats. To form the government, the Mulcair NDP will need to not only hold onto their 22 seats in Ontario and the Prairies (19 and 3 respectively), but will need to win an additional 75 in those regions. An additional 75! This is quite an electoral challenge, and this I feel explains why the NDP have chosen a platform centred on balance budgets: to win the confidence of the dissatisfied moderate of Ontario and the West. Assuming the mantle of Tommy Douglas (and Roy Romanov) and not Bob Rae (and Glen Clarke and Darrell Dexter) positions themselves as such.</p>
<p>The Trudeau Liberals, needing to distinguish themselves from the Mulcair NDP, have taken the courageous stance and promised three years of deficit spending, investing in infrastructure. Will it persuade Canadian voters? With only 36 seats at dissolution, they have even more ground to gain, an additional 134 seats, to form the government! That would be quite the red tide, compared to the orange wave.</p>
<p>Political scientist Peter Hall once remarked:"Much of what goes on in the political arena is, in fact, a struggle among political entrepreneurs to define the way in which the electorate or potential followers within it interpret their interests." In the days leading up to October 19, it will be interesting to see how Mulcair and Trudeau teams perform in defining the interests of Ontario and Western voters.</p>
<p><em>Photo: <a href="https://www.flickr.com/photos/morbokat/16268702190/in/photolist-qMBmnm-7qtwXZ-dfEsfX-5c6iix-9WCVrA-4nNJhF-hZpHNj-7qxuN1-xvjg6h-cPDZL-9WA43c-e8ieZb-r5233c-arGUvF-duTnMn-4nztUS-r3UPm2-9tqV4X-65Binc-bMaiBV-r4oSbR-axDR25-qErb7g-bcnRDH-q8aFTE-q8ofP4-mdBDJ-6L2p2b-4UZRWH-2EzF-p1y5Eo-aT1W84-b7CeXz-dhos7P-5Ndf1e-7NFnG1-dhooUw-dhonDb-dhokFP-dhon6y-dhoqHN-gYy3yJ-5aSNPg-w8UpN-bWXcoF-3eaugw-4DaUDF-dhowNJ-5A2AqH-49KUQ5" target="_blank" rel="nofollow">KMR Photography/flickr</a></em></p>
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</p></div></div></div>Tue, 22 Sep 2015 15:25:39 +0000Progressive Economics Forum120398 at https://rabble.caHarper is fighting the deficit battle but losing the economic war https://rabble.ca/columnists/2015/07/harper-fighting-deficit-battle-losing-economic-war
<div class="field field-name-taxonomy-vocabulary-22 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/issues/economy">Economy</a></div><div class="field-item odd"><a href="/issues/politics-canada">Politics in Canada</a></div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/joe_oliver.jpg?itok=ciNrUksV" width="1180" height="600" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em> <a href="https://secure.rabble.ca/donate/" target="_blank" rel="nofollow">Chip in</a> to keep stories like these coming.</em></p>
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<p>The evidence is mounting that Canada's economy may already be in an outright recession. Recent data on investment, exports, building permits and retail sales all paint a gloomy picture, and Friday's jobs numbers (the private sector shed 49,000 jobs in June, partly offset by public sector hiring) added to the pessimism. Through it all, however, federal Conservative leaders return again and again to their favoured touchstone: never mind the economy, we balanced the budget. And that's what really matters.</p>
<p>Indeed, they go farther: not only should deficit elimination still be the top priority -- even in a weak economy. More than that, the mere act of balancing the budget will itself spur economic recovery. Finance Minister Joe Oliver put it this way, in a recent interview with CBC Radio: "We have a solid fiscal situation, and that's why we continue to believe we're going to see solid economic growth this year."</p>
<p>The prospects of Canada experiencing anything remotely resembling "solid growth" this year are non-existent, and Mr. Oliver knows it. The economy kicked off 2015 with four straight monthly declines in GDP; Statistics Canada will report whether we're in an official recession (defined as two consecutive quarters of negative growth) on September 1. The economy would have to suddenly surge spectacularly just to meet the ho-hum growth assumption underlying Mr. Oliver's most recent budget. More likely is that the GDP will finish the year about where it started, if not lower.</p>
<p>But the more puzzling aspect of Mr. Oliver's view is his treatment of "balanced budget" and "strong economy" as virtual synonyms -- with the one automatically implying the other. The budget balance tells you whether government is taking in more than it spends. Growth, on the other hand, depends on whether the whole economy (85 per cent of which is in the private sector) is producing more, or producing less. They are totally different concepts.</p>
<p>So precisely how does eliminating a government deficit ensure more production? Fiscal hawks are very vague on the "transmission mechanism" that might link these separate indicators. Some hope that business confidence will be bolstered by a balanced budget, and hence companies will finally open the taps on their investment spending. Don't hold your breath. Free market purists argue that any resources sucked up by government "crowd out" resources that would otherwise be used (with greater efficiency) in the private sector. That's especially hard to swallow in the face of mass unemployment. Mr. Oliver himself provided another explanation: the government should balance its budget now, so it has room for extraordinary measures in the event of more serious troubles down the road. This convoluted logic hardly inspires optimism.</p>
<p>In day-to-day economic reality, a deficit does not have any direct impact on the state of spending power, hiring, production and growth. And if deficit reduction is accomplished through big spending cuts (as has been the case for Ottawa), then it clearly inhibits growth. When growth is strong, the deficit tends to shrink automatically, and vice versa when times are weak. But the deficit is the follower, not the leader, in this relationship.</p>
<p>Conservatives need to dust off their first-year college macroeconomics textbooks. Overall economic activity is determined by the spending power available to buy what we collectively produce. There are four major categories of spending -- and hence four main engines that can potentially lead to growth: business investment, exports, consumer spending and government.</p>
<p>Unfortunately, the first three are all presently headed in the wrong direction. Business capital spending was sluggish even before oil prices fell (despite large corporate tax cuts), and now it's shrinking fast. Exports have fallen steadily through the year (producing record trade deficits). And consumers, finally tapped out after years of record debt, are sitting on their wallets: retail sales fell in April. (At any rate, consumers can't usually lead the growth parade, anyway, since they need a job in the first place before they can go out shopping.)</p>
<p>In the face of such multi-dimensional weakness, what good does it do to eliminate a deficit in the remaining sector of the economy? In a best-case scenario, absolutely nothing. And more likely, the austerity imposed to attain balance (for the federal government, this includes $15 billion annually in cumulative spending cuts and nearly 50,000 lost jobs since 2011) only further undermines demand, both directly and indirectly (by further chilling consumers).</p>
<p>Mr. Oliver's budget is not really balanced, anyway. His apparent triumph was achieved through accounting gimmicks: reallocating contingency funds, selling off public assets, raiding the EI surplus, and even pre-booking the value of expected cost savings from labour contracts that haven't even been negotiated yet. Now with growth falling well below his 2-per-cent budget assumption, another multi-billion-dollar hole has opened up in his budget.</p>
<p>But even if that balance was more genuine, it's still a hollow victory. Federal spending cuts are only exacerbating a startling decline in private sector employment and output. Mr. Oliver's government claims to have won the deficit battle. But it is clearly losing the economic war.</p>
<p><em>Jim Stanford is an economist with Unifor. A version of this commentary was originally published in the</em> <a href="http://www.theglobeandmail.com/report-on-business/rob-commentary/tories-need-to-rethink-a-balanced-budget-focus-on-economic-stimulation/article25421573/" target="_blank" rel="nofollow">Globe and Mail</a>.</p>
<p><em>Photo: <a href="https://www.flickr.com/photos/theharv58/19596217445/in/photolist-vRDJJ2-vRDJAX-qSAcrn-qS5t7g-qSa6TW-biYDLX-hESuAe-hrYBaV-ca454L-ca4vFA-ca4seA-ca3CW5-ca3Cwd-ca3C9q-ca3zJU-ca3zzo-ca4vUw-ca4vrm-ca4rPS-bWUNWx-6zzT8x-6zDYZY-bWVdiB-ca44xm-ca3YZQ-nGJhGA-c9ZRNJ-c9ZRKE-c9ZRB5-c9ZRym-ca3zdo-ca3w3Q-ca3vNh-nWsX2L-nYpDQ3-nWsWRq-bWZYht-cenjLY-cenjGJ-bWZY2p-bWZXUe-bWZXAB-cenj91-cenj6G-cenj3Q-cenj1J-bWZXrT-bWZXhx-cehW7J-bWZYun" target="_blank" rel="nofollow">Harvey K/flickr</a></em></p>
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</p></div></div></div><div class="field field-name-taxonomy-vocabulary-9 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/category/tags-issues/economic-stimulus">economic stimulus</a></div><div class="field-item odd"><a href="/category/tags-issues/federal-deficits">federal deficits</a></div><div class="field-item even"><a href="/category/tags-issues/government-spending">government spending</a></div><div class="field-item odd"><a href="/category/tags-issues/economic-growth">economic growth</a></div><div class="field-item even"><a href="/category/tags-issues/spending-cuts">spending cuts</a></div><div class="field-item odd"><a href="/taxonomy/term/4632">Canadian economy</a></div><div class="field-item even"><a href="/category/tags-issues/deficit-hysteria">deficit hysteria</a></div><div class="field-item odd"><a href="/category/tags/harper-goverment">Harper goverment</a></div></div></div><div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/category/bios/columnist/jim-stanford">Jim Stanford</a></div></div></div><div class="field field-name-field-story-publish-date field-type-date field-label-hidden"><div class="field-items"><div class="field-item even"><span class="date-display-single">July 14, 2015</span></div></div></div><div class="field field-name-field-related-item1 field-type-link-field field-label-hidden"><div class="field-items"><div class="field-item even"><a href="http://rabble.ca/columnists/2015/06/judging-odds-election-recession" rel="nofollow" target="_blank">Judging the odds for an election recession</a></div></div></div><div class="field field-name-field-related-item1-desc field-type-text field-label-hidden"><div class="field-items"><div class="field-item even">If the GDP continues to shrink, then by the conventional definition, Canada will be in a recession -- just in time for the federal election campaign. What are the chances of that happening?</div></div></div><div class="field field-name-field-related-item2 field-type-link-field field-label-hidden"><div class="field-items"><div class="field-item even"><a href="http://rabble.ca/blogs/bloggers/progressive-economics-forum/2015/02/harper-closet-over-economy-canada-heads-toward-an">Harper in closet over the economy as Canada heads toward another recession </a></div></div></div><div class="field field-name-field-related-item2-desc field-type-text field-label-hidden"><div class="field-items"><div class="field-item even">With his economic cards on the table, Harper&#039;s hand is proving to be very weak. In order to win an election, he must create momentum, but the state of the economy won&#039;t give him this opportunity.</div></div></div><div class="field field-name-field-related-item3 field-type-link-field field-label-hidden"><div class="field-items"><div class="field-item even"><a href="http://rabble.ca/blogs/bloggers/progressive-economics-forum/2015/06/another-recession-on-its-way" rel="nofollow" target="_blank">Is another recession on its way?</a></div></div></div><div class="field field-name-field-related-item3-desc field-type-text field-label-hidden"><div class="field-items"><div class="field-item even">Canada&#039;s economy shrank in the first quarter by a whopping 0.6 per cent. Is this the beginning of a new recession?</div></div></div>Tue, 14 Jul 2015 13:06:26 +0000rabble staff119147 at https://rabble.caThe promise of Canadian capitalism: Stagnation without end https://rabble.ca/blogs/bloggers/progressive-economics-forum/2015/05/promise-canadian-capitalism-stagnation-without-en
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Kim Pollock</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/jobcentre.jpg?itok=81ij94Tc" width="1180" height="600" alt="Photo: quixotic54/flickr" title="Photo: quixotic54/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p><em>We are pleased to present this guest commentary from Kim Pollock, a former union researcher based in B.C. and Saskatchewan. Now retired, Kim is investigating various aspects of Canada's economic performance. A longer version of this paper will be presented by him at the upcoming Society for Socialist Studies meetings in Ottawa, and can be obtained by e-mailing him at kbpollock54[at]gmail.com. Thanks Kim for this insightful and provocative analysis!</em></p>
<p>The Great Recession has ground on for over six years. Working-class Canadians face unemployment, declining incomes, precarious jobs, reduced savings and mounting poverty. And there's no end in sight. The recession has become a prolonged agony, rivaling the long stagnation following the 1929 crash.</p>
<p>Economic growth has slowed dramatically. GDP grew by an annual average of 4.8 per cent from 2004 through 2008, just 2.1 per cent from 2009 through 2013. Over the first five years of recession, the average annual rate of corporate profit declined 11.4 per cent, average annual investment spending fell by 21.9 and the rate of investment (the ratio of investment to corporate profits) 41.7 per cent. Industrial capacity utilization fell from an annual average of 82.5 per cent to 79.0 per cent.</p>
<p>Why? Since profitability drives employment and investment, the simple answer is that corporations cannot achieve acceptable levels of profit. In 2013 the rate of profit was still 14.7 per cent below its pre-recession peak. So companies have mothballed job-creation and investment.</p>
<p>And they won't invest or hire until the profit rate revives. They're making profits now -- the average annual mass of profit since the recession slightly exceeds that of the five pre-recession years, although it slumped significantly in third-quarter 2014. But it's the rate of profit which matters -- profits compared to the costs incurred in producing it. So instead of investing, corporations are paying monstrous salaries to senior managers and lavish dividends to owners and shareholders, buying up their own shares to elevate share prices, investing offshore -- or simply hoarding mountains of cash.</p>
<p>Governments are meanwhile constrained by the prevailing rules of the game. Their only options are to try to drive recovery via Keynesian-style stimulative measures or simply do nothing and hope the economy rights itself. Both present political risks. Stimulus requires a confrontation with big business, unthinkable unless governments face serious popular unrest or enjoy unimaginable popular support. Lacking opposition, the path of least resistance is to balance budgets, cut spending and wait -- the strategy dignified as "austerity."</p>
<p>There will certainly be no stimulus under the Harper Conservatives -- even in the depth of recession, they only risked it when threatened with forcible removal from office. But even a less hide-bound government would likely find Keynesianism disappointing. Corporations control the levers of finance and production. Government stimulus requires either borrowing or taxation -- either corporations or workers must pay.</p>
<p>But taxing corporations to stimulate investment is as counter-productive as taxing families, then urging them to spend. Borrowing simply delays the choice, then redirects to banks portions of families' incomes and non-financial corporations' profits. All these strategies risk a fight with business for which no imaginable Canadian government has the stomach.</p>
<p>What does this mean for working people?</p>
<p>For most, it's more years of just hanging on; for many others, real poverty. Consider incomes. Unionized workers' wage demands are perhaps the key driver of working-class incomes. And union wage settlements have fallen sharply -- wage increases in the first year of Canadian collective agreements averaged 2.9 per cent between 2004 and 2008 but 1.7 per cent after 2009. And paradoxically, although workers are less willing to strike, unions must take longer strikes to get today's modest raises.</p>
<p>In fact, consistent with the view that collective bargaining drives working-class incomes, most workers' pay has stagnated -- even more than union wages. Over half of Canadian workers have fallen behind inflation. Average hourly wages rose 2.8 per cent per year from 2004 to 2008 (with inflation at 1.8 per cent per year) but only 1.4 per cent after that (below inflation, 1.5 per cent). And the average employee worked 0.6 fewer hours weekly from 2009 to 2013 compared to the previous four years -- a small reduction in hours that costs average families some $2,000 a year.</p>
<p>Many families are already precariously employed, their incomes declining or vulnerable -- in fact, the majority. The Canadian Payroll Association reported in 2014 that 51 per cent of Canadians believed they "live paycheque to paycheque," up from 47 per cent in 2012. Seventeen percent said things would be "very difficult" should they miss even one paycheque.</p>
<p>In addition, many Canadians lost savings or pension income, risked losing their homes or went deeper in debt. Thousands faced the even more fearsome challenge of losing their jobs. Unemployment ballooned, as did employment insurance claims. The monthly average number of unemployed Canadians was 1.1 million from 2004 to 2008, 1.4 million since 2009.</p>
<p>Yet because government evaluators tightened the screws, it became harder to even collect EI. The Toronto Star reported that of 867,000 unemployed Canadians who contributed to EI in 2011 only 545,000 worked enough to qualify -- 62.8 per cent, the lowest qualification rate since 2003. The average annual number of claimants rose by 6.1 per cent, disqualifications by 28.9 per cent.</p>
<p>Those who exhaust their benefits or can't collect EI likely wound up on welfare. Canadian welfare recipients averaged 1.68 million from 2004 to 2008, 1.79 million over the next four years, an average annual rise of 6.5 per cent per year. Food Banks Canada found monthly food-bank usage in 2013 was 25 per cent above 2008 -- usage fell by 2.2 per cent per year between 2003 and 2008 but rose at 4.5 per cent per year in the recession.</p>
<p>In other words, it is now far easier to fall into poverty than to get out. From 2004 through 2008, StatsCan data shows the number of persons in families defined as "low-income" fell 4.2 per cent per year. Over the next four years the trend reversed: each year on average 3.5 per cent more people lived in poor families.</p>
<p>Poverty is growing particularly rapidly among already-vulnerable groups, starting with children. According to a 2014 UNICEF report, "one-third of food bank users were children, despite representing less than a quarter of the total population." Canada's overall incidence of poverty was 8.8 per cent in 2011 but 17.3 per cent among off-reserve Aboriginal peoples, 18.4 per cent for recent immigrants, 19.7 per cent among single parents, 23.5 per cent for persons living with disabilities and 34.8 per cent for middle-aged unattached individuals. UNICEF concludes: "In Canada, diminished job security, growth of temporary work, lower wages, rising costs for education and record student debt levels are dampening the economic security of a generation…"</p>
<p>The relationship between poverty and falling wages actually works both ways. Rising unemployment and an expanding "reserve army of unemployed" make it harder for unions to organize or strike. Conversely, when unions face obstacles, wages fall, the mass of impoverished people grows. The farther wages fall the more poverty increases -- and vice versa.</p>
<p>Consider manufacturing, historically high-paying but where falling pay has accompanied job loss and reduced unionization. Average hourly manufacturing wages were 4.5 per cent above the national average in 2004, 2.8 per cent higher in 2008 -- but by 2013 five cents an hour below the national average.</p>
<p>In short, Canadians' incomes are falling or stagnating. The longer the recession lasts, the more they'll fall. Union wages are rising at slightly above inflation; most workers are losing ground. Thousands are becoming impoverished while those already poor fall deeper.</p>
<p>What would end the recession?</p>
<p>On capitalism's owns terms, only a higher profit rate. But that depends on corporations' ability to increase the hours workers produce for them rather covering the costs of wages and benefits. During the boom, this so-called "rate of exploitation" (corporate profits divided by employee compensation) fell as companies hired more workers and expanded. When profit-making began to slow, the rate of exploitation fell too. From an average of 32.0 per cent from 2004 to 2008 it fell as low as 21.6 per cent, averaging just 26.7 per cent in the five post-recession years. Stated bluntly, with the rate of exploitation at 26.5 per cent in 2013, workers were producing for their employers just over one hour in four compared to over one hour in three nine years earlier.</p>
<p>The labour-costs-to-profit ratio is a major managerial preoccupation, yet after five years of recession it's still depressed. That is what a recession is all about -- and there won't be much hiring or new investment until the profit rate recovers.</p>
<p>Even before the petroleum-price slump Canada appeared headed for another recession; falling oil prices virtually guarantee it. And the long-anticipated U.S. recovery seems to have again gone south: economists now say "wait until 2016." China -- many Canadian firms' other great hope -- remains trapped in recession and sitting on stockpiles of key commodities. The government recently reduced coal imports to support struggling Chinese mines. Globally, the International Monetary Fund cut 2015 growth forecasts to 3.5 per cent from October's 3.8 per cent.</p>
<p>Canadian workers should harbour no illusions. The wealthy will ride out a long recession; few workers can. For them, the status quo means things get worse. And there's little to suggest it won't -- StatsCan counts over five job seekers for every available job while wages stagnate. There's little on offer but more hard times.</p>
<p>In addition, workers find themselves essentially on their own to face the crisis -- if falling incomes, rising poverty or high unemployment were problems for the wealthy, they'd have been addressed long ago! And most middle-class Canadians find environmental issues more compelling than job creation.</p>
<p>The right wants balanced budgets. On the centre-left, worries about environmental impacts trump concern for the social impacts of the crisis. Even New Democrats choke on the words "working class." Working people and vulnerable groups either have to "live with it" or develop their own solutions, strategies and demands, perhaps even their own political organizations. If they do, they'll find themselves on unfamiliar ground, forced to think outside the box, form alliances and raise hell in unprecedented ways.</p>
<p>Perhaps it's time.</p>
<p><em>Photo: <a href="https://www.flickr.com/photos/quixotic54/3258810852/in/photolist-arhPfM-bAjNG7-p2Zvd6-7hn9kh-aAyqnx-asnSGv-9qBDGN-8YCzjj-7T1jg1-nExCCU-67qcm8-c9PTSU-5XYfW1-9ERfPu-a44ebT-dTnUqr-9k1PW9-5VV3wU-5RapbH-aY5Egv-8Z4crB-fm9VRv-eaYRij-akCzKb-62zQqM-6cwibN-7fEGuE-5sZe5P-5sZ6Yv-eTriLa-5vr3sH-daEhrw-arPnqK-ao9AXh-79XTrD-6oTZQ4-9JoVgs-e4G8N9-f9B9Cf-5VV3sW-5VV3q9-5VV3nm-5VQFWk-9pRBrE-6RBoJT-8deZSU-aY4Rgx-9HrVus-areHDS-ao6Snk" target="_blank" rel="nofollow">quixotic54/flickr</a></em></p>
</p></div></div></div>Wed, 20 May 2015 13:58:50 +0000Progressive Economics Forum118113 at https://rabble.caBudget 2015: The inequality budget https://rabble.ca/blogs/bloggers/policyfix/2015/04/budget-2015-inequality-budget
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Lynne Fernandez</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/5_cents.jpg?itok=uxKO5bSn" width="1180" height="600" alt="Photo: Kat R/flickr" title="Photo: Kat R/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p>Finance Minister Joe Oliver had a chance Tuesday to prove the Harper government's economic prowess. The budget he delivered, however, failed miserably to do that. <br /> Increased stimulus spending would have allowed provinces and municipalities to deal with Canada's $172 billion infrastructure deficit ($11 billion in Manitoba and $3.8 billion in Winnipeg alone) and create new jobs. A federal living wage would have made many of those jobs decent ones.</p>
<p>This budget's infrastructure spending disappoints in two ways. First, money is not available right away. The Finance Minister appealed to our sense of fiscal responsibility given the unpredictability of the economy, but the longer we wait to fix our infrastructure, the more it will cost to repair it. Secondly, $5.35 billion will be available through a New Building Canada Plan which means that only spending that includes Public Private Partnerships (P3s) will be considered. There are too many red flags around P3s, many of which have left taxpayers on the hook for millions of dollars, to be forcing them on other levels of government. Despite federal government claims that Canada came out of the recent recession in a strong position, our economy is just sputtering along. The federal government is not doing enough to stimulate the economy for the benefit of all Canadians.</p>
<p>Economic growth bottomed out in 2009, with GDP shrinking by 1.25 per cent, but by 2011, growth improved to around 3.5 per cent. This correction occurred largely because of government stimulus spending. Today, growth sits at an anemic 2.64 per cent. The global economy continues to struggle, with the Eurozone in the doldrums and China and other emerging markets slowing down. This global slump does not bode well for a country that relies so heavily on resource extraction: just consider how the fall in oil prices has impacted this budget. Bank of Canada forecasts have Canadian economic growth flickering around 2 percent until 2017.</p>
<p>Other economic observes believe there are signs of a serious structural problem that began long before oil prices tumbled and the global financial sector imploded. Those signals have been coming from the labour market, where job quality indicators are pointing to strong growth in precarious low-wage, part-time work. CIBC senior economist Benjamin Tal notes that last year the number of low-paying full-time jobs rose twice as much as the number of high-paying jobs.</p>
<p>These concerns are augmented by this week's Statistics Canada Job Vacancies report. For every job vacancy in Canada, there are 5.8 people who need a job -- a good job with decent pay and benefits so they can provide a degree of economic security to their families and have enough disposable income to stimulate the economy.</p>
<p>But infrastructure is not just physical -- social infrastructure is also required for a healthy economy. Despite the proven advantages to a child's life-long development and its role in gender equality, child care is woefully supported in Canada. Manitoba has demonstrated leadership in the childcare area, but it cannot provide the support required on its own. It is unfortunate that this federal budget did not invest more in childcare: every new child-care job creates or sustains another 2.15 jobs, and every dollar spent generates $1.58 of economic activity in Manitoba's rural and northern regions and $1.38 in Winnipeg.</p>
<p>Instead of increased spending on child care to help many low and mid-income families, we got income-splitting which will help far fewer wealthy families -- families whose children already have access to the best education and who do not have to have both parents working. Only families (with children under 18) in the top 50 per cent income brackets will benefit from income-splitting and a mere 18 per cent of them will see just over $300. Just 11 per cent of families with children will receive the full benefit of around $2,000, and these will be Canada's wealthiest. This generous tax break will be lost on 89 per cent of Canadian households, but will cost around $2 billion in lost revenue that could have gone towards a national child-care program.</p>
<p>Another questionable tax break comes with the doubling of the Tax Free Savings Account to $10,000, despite the fact that average annual contributions have been decreasing every year since it began in 2009. Mostly high-income, older Canadians take advantage of these accounts. Because interest accrues without being subject to tax, its budgetary impact grows with time. The Parliamentary Budget Officer estimates that TFSAs will take $14.8 billion from federal coffers and $7.6 from provincial revenues by 2060. That could pay for a lot of child care, or eliminate child poverty (Manitoba has the 2nd highest child poverty rate in Canada), or revitalize our starving health-care system or ensure safe drinking water on First Nations, or (fill in the blank).</p>
<p>Even though the TFSA increase and income-splitting have been largely criticized as bad public policy, future leaders will be hesitant to reverse them lest they get labelled as tax-and-spend politicians. So rather than showing their fiscal responsibility by creating good jobs and investing in Canada's working and middle class, this budget secures the position of Canada's richest and further confounds our ability to deal with our greatest challenges.</p>
<p><em>Lynne Fernandez is an economist with the Canadian Centre for Policy Alternatives, Manitoba. She holds the Errol Black Chair in Labour Issues.</em></p>
<p><em>Photo: <a href="https://www.flickr.com/photos/morbokat/16255949427/in/photolist-qLtZq8-jvqk-aUYpEk-3EMysX-KryVG-3ERV53-KrDhp-KrDjB-PSRjQ-r3URGp-6mhqyz-KryR5-be5XWD-PTpMH-qLZjru-4r7Y79-Kryos-KrD5k-PTps4-KrDFc-KrDKT-6aghN3-KrDwc-dAH4ef-dAByWz-KrxYG-8vg8oJ-Krz15-8vd5Pz-8vg8f5-KryrA-Kryu1-r4xVaT-qMBmnm-qM84Pe-7r4Knz-45NxtB-r5233c-5xoued-r4oSbR-7Lym6m-8fJdH5-r4xUL6-KrD2n-Kryib-KrDni-KrDkK-r2fzUf-r2SHGY-r523sa" target="_blank" rel="nofollow">Kat R/flickr</a></em></p>
</p></div></div></div>Mon, 27 Apr 2015 13:52:52 +0000policyfix117681 at https://rabble.caWill interest rate cuts convince Harper to give up on a balanced budget? https://rabble.ca/blogs/bloggers/progressive-economics-forum/2015/01/will-interest-rate-cuts-convince-harper-to-give-o
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Angella MacEwen</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/srmarginalcostoil_0.jpg?itok=LGY7SRlv" width="1180" height="600" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p>The Bank of Canada <a href="http://www.theglobeandmail.com/report-on-business/economy/bank-of-canada-rate-cut/article22548417/" rel="nofollow">surprised most analysts</a> this week when it decided to cut rates by 25 basis points. The move comes after the price of oil has tumbled below $50 a barrel, oil producers announced <a href="http://calgaryherald.com/business/energy/capp-predicts-23-billion-decline-in-oilpatch-investment" rel="nofollow">huge cuts</a> to business investment for 2015, Target announced a mass layoff of 17,600 workers in Canada, and the International Monetary Fund warned of a global economic slowdown.</p>
<p>The key message of the January <a href="http://www.bankofcanada.ca/wp-content/uploads/2014/07/mpr-2015-01-21.pdf" rel="nofollow">monetary policy</a> is that the Canadian economy needs stimulus. The Bank's view of the Canadian economy stands in sharp contrast to that of the federal government, which is intent on delivering a balanced budget with a basket full of family tax cut goodies. By spending their surplus before they had even secured it, and then also sticking to an unrealistic balanced budget timeline, this government painted themselves into a corner, and made themselves look very foolish.</p>
<p>Thank goodness that the Bank was willing to act, and put the well-being of Canadians over concerns of a housing bubble and excess household debt.</p>
<p>So, what was the biggest outcome of the announcement? The loonie fell to 81 cents USD, down nearly two cents on the day. It is now five cents lower than it was on January 1. Since oil and other commodities are priced in U.S. dollars, the lower loonie effectively boosts prices for Canadian commodities producers. For those that were operating at or just below their short-run cost margins, this is great news. According to the above chart taken from <a href="http://www.bankofcanada.ca/wp-content/uploads/2015/01/remarks-130115.pdf" rel="nofollow">Timothy Lane's remarks</a> on January 13, that includes several sites in Canada.</p>
<p>While many analysts pointed to how this move was good for manufacturing, the most immediate impact of the Bank's rate cut is to save thousands of jobs in the oil, gas, and mining sector.</p>
<p>As I've pointed out before, the benefit to manufacturing depends partly on the ability of existing manufacturing firms to grow. New entrants will be unlikely to rely on the lower dollar to stick around forever, but may be able to use the current cushion to get their projects off the ground. This will take some time. The lower dollar increases most machine and equipment input costs, so labour intensive firms actually have the advantage in the current environment.</p>
<p>The Bank issues its next rate announcement in March, and many observers are considering the possibility of another rate cut at that time. What is that likely to depend on? Well, the Bank based their estimate on $60 oil, and it's currently below $50. The price is unlikely to rise until something gives on the supply side. Canadian and American producers are currently saying that their production will increase this year, just at a slower rate than last year. Saudi Arabia seems intent on keeping supply high until it forces some of those North American producers out of the market. If the price of oil stays low for the next couple of months, we could easily be looking at yet another cut from the Bank. Would it be enough for Stephen Harper to give up on a balanced budget? That's a tougher question.</p>
</p></div></div></div>Fri, 23 Jan 2015 13:52:54 +0000Progressive Economics Forum115693 at https://rabble.caThe Bank of Canada's latest move is less surprising than you think https://rabble.ca/blogs/bloggers/behind-numbers/2015/01/bank-canadas-latest-move-less-surprising-you-think
<div class="field field-name-taxonomy-vocabulary-14 field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even">Hugh Mackenzie</div></div></div><div class="field field-name-field-image-for-node field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img src="https://rabble.ca/sites/default/files/styles/large_story_850px/public/node-images/bank_canada_1.jpg?itok=pM8dY9gE" width="1180" height="600" alt="Photo: Mikey G Ottawa/flickr" title="Photo: Mikey G Ottawa/flickr" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p>Canada's financial industry and its associated analysts reacted with shock and dismay to the Bank of Canada's announcement this week that it was lowering its trend-signalling interest rate from 1.0 per cent, where it had been pegged since 2010, to 0.75 per cent.</p>
<p>While they might have valid business reasons for their response -- after all, virtually all of them had been advising their clients, employers, and shareholders that rates were likely to go up, not down, in the next few months, they shouldn't have been surprised.</p>
<p>The gap between Canadian and U.S. interest rates created by the announcement <em>should</em> be widening. The U.S. economy is doing better than Canada's and is likely to outperform Canada's in the intermediate future. Low oil prices have less of a downside in the U.S. than they do in Canada, along with an equally powerful upside.</p>
<p>The Canadian dollar <em>should</em> be declining in value. It was grossly overvalued when its premium relative to the U.S. hit 10 per cent. With the drop in oil prices below production costs in much of Western Canada, even a value in the high 80-90 cent range was excessive.</p>
<p>But there's another reason why people shouldn't be surprised that the Bank of Canada acted so decisively and so early to respond to clear signs of economic weakness.</p>
<p>Despite virtually universal agreement among the experts that monetary stimulus is pretty much tapped out as a response to weakening economic conditions, it is still -- as it has been since the federal government embarked on its hell-or-high-water deficit crusade -- the only game in town.</p>
<p>Faced with evidence of economic weakness that couldn't be clearer, federal fiscal policy -- the only policy measure with any potential to stimulate the economy -- is missing in action.</p>
<p>Just as the indicators of a weakening economy couldn't be clearer, so, too, are the indicators that the federal government intends not just to sit this one out, but that it intends to persist with a fiscal strategy guaranteed to make the situation worse.</p>
<p>Despite the evidence that economic fundamentals have deteriorated, the government is sticking steadfastly, not only to its deficit elimination target, but also to the dangerously wasteful tax cuts that made the deficit reduction target harder to hit.</p>
<p>Remarkably, faced with a situation in which most responsible governments would have moved up its budget date in order to provide leadership and direction in troubling times -- and to provide Canadians with assurance that the government is on the job and doing something to alleviate the impact of the oil crunch -- the government is delaying the budget until April at the earliest.</p>
<p>The action by the Bank of Canada should be of concern to Canadians, but not for the reasons cited by the Canadian financial industry.</p>
<p>The bank's decision on interest rates reflects its conclusion that the Government of Canada will persist with a policy trajectory that is bound to make the economy even weaker, despite evidence that should be guiding it in a different direction.</p>
<p>So while Canadians should be thankful that at least someone in power in Ottawa is paying attention to the real world, they might ask why it is the Bank of Canada, and not the government, that is doing so.</p>
<p><em>Economist Hugh Mackenzie is a CCPA Research Associate. Follow Hugh on Twitter <a href="http://twitter.com/mackhugh" rel="nofollow">@mackhugh</a></em></p>
<p><em>Photo: <a href="https://www.flickr.com/photos/14813074@N00/2995915891/in/photolist-5yJRqg-9VAWTL-foR1UH-7mixMY-d3ZKFG-34ng9J-6TsoHA-9dYonJ-bViP1V-5qAUBs-3pZEDQ-brZYTW-8JyhPA-5um9AP-8FYtw3-aS7Wmx-aS7WCM-ceyFHJ-aS7X3v-Dva3S-bzcnYk-eij4m-bBtvqG-8Xm6y6-aRK9q2-nQsyXs-Dv9Rw-9pmQRD-bYMcnj-bYLim9-bYLizf-bhqWD6-Dv9VM-2x1QpK-7pXXQH-5VLFqN-3wunyV-2x1MFF-f34pL-cbUes5-boF6SR-2x1Snx-7PgR8c-dkPZXh-m7jnVX-2x66co-b8VUyx-2x1TLM-87Wsx5-Dv9SJ-9SyPJd" target="_blank" rel="nofollow">Mikey G Ottawa/flickr</a></em></p>
</p></div></div></div>Fri, 23 Jan 2015 13:37:23 +0000Behind The Numbers115692 at https://rabble.ca